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The Alabama LLC operating agreement is a legal document that is recommended for those opening a limited liability company. This document allows the member(s) and/or owner(s) to file formation articles, outline responsibilities, identify voting rights, and perform other ownership responsibilities in a multi-member LLC.

From AL Code § 10A-5A-1.02 (2019):

(l) “Limited liability company agreement” means any agreement (whether referred to as a limited liability company agreement, operating agreement or otherwise), written, oral or implied, of the member or members as to the activities and affairs of a limited liability company or series thereof. The limited liability company agreement of a limited liability company having only one member shall not be unenforceable by reason of there being only one person who is a party to the limited liability company agreement. The limited liability company agreement includes any amendments to the limited liability company agreement.

Alabama Operating Agreement Law

Per Section 10A-5A-1.08 of the Alabama Business and Nonprofit Entities Code:

(a) Except as otherwise provided in subsections (b) and (c):
(1) the limited liability company agreement governs relations among the members as members and between the members and the limited liability company; and
(2) to the extent the limited liability company agreement does not otherwise provide for a matter described in subsection (a)(1), this chapter governs the matter.
(b)(1) To the extent that, at law or in equity, a member or other person has duties, including fiduciary duties, to the limited liability company, or to another member or to another person that is a party to or is otherwise bound by a limited liability company agreement, the member’s or other person’s duties may be expanded or restricted or eliminated by a written limited liability company agreement, but the implied contractual covenant of good faith and fair dealing may not be eliminated.
(2) A written limited liability company agreement may provide for the limitation or elimination of any and all liabilities for breach of contract and breach of duties, including fiduciary duties, of a member or other person to a limited liability company or to another member or to another person that is a party to or is otherwise bound by a limited liability company agreement, but a limited liability company agreement may not limit or eliminate liability for any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing.
(3) A member or other person shall not be liable to a limited liability company or to another member or to another person that is a party to or is otherwise bound by a limited liability company agreement for breach of fiduciary duty for the member’s or other person’s good faith reliance on the limited liability company agreement.
(4) A limited liability company agreement may provide that:
(A) a member or transferee who fails to perform in accordance with, or to comply with the terms and conditions of, the limited liability company agreement shall be subject to specified penalties or specified consequences; and
(B) at the time or upon the happening of events specified in the limited liability company agreement, a member or transferee may be subject to specified penalties or specified consequences.
(5) A penalty or consequence that may be specified under paragraph (4) of this subsection may include and take the form of reducing or eliminating the defaulting member’s or transferee’s proportionate interest in a limited liability company, subordinating the member’s or transferee’s transferable interest to that of non-defaulting members or transferees, forcing a sale of that transferable interest, forfeiting the defaulting member’s or transferee’s transferable interest, the lending by other members or transferees of the amount necessary to meet the defaulting member’s or transferee’s commitment, a fixing of the value of the defaulting member’s or transferee’s transferable interest by appraisal or by formula and redemption or sale of the transferable interest at that value, or other penalty or consequence.
(6) A written limited liability company agreement may supersede, in whole or in part, the provisions of Division C of Article 3 of Chapter 1.
(c) A limited liability company agreement may not:
(1) vary the nature of the limited liability company as a separate legal entity under Section 10A-5A-1.04(a);
(2) vary the law applicable under Section 10A-5A-1.05;
(3) restrict the rights under this chapter of a person other than a member, dissociated member, or transferee;
(4) vary the power of the court under Section 10A-5A-2.05;
(5) eliminate the implied contractual covenant of good faith and fair dealing as provided under Section 10A-5A-1.08(b)(1);
(6) eliminate or limit the liability of a member or other person for any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing as provided under Section 10A-5A-1.08(b)(2);
(7) waive the requirements of Section 10A-5A-4.04(c);
(8) vary the law applicable under Section 10A-5A-4.06(c);
(9) reduce the limitations period specified under Section 10A-5A-4.06(d) for an action commenced under other applicable law;
(10) waive the prohibition on issuance of a certificate of a transferable interest in bearer form under Section 10A-5A-5.02(c);
(11) vary the power of a court to decree dissolution in the circumstances specified in Section 10A-5A-7.01(d) or in Section 10A-5A-11.09(e);
(12) vary the requirement to wind up a limited liability company’s activities and affairs as specified in Section 10A-5A-7.02(a);
(13) vary the provisions of Section 10A-5A-8.01;
(14) vary the right of a member under Section 10A-5A-10.09; or
(15) waive the requirements of Section 10A-5A-11.02(b).

Forming an LLC in Alabama

  1. Conduct a name search
  2. File a name reservation request form for domestic entities
  3. Choose a registered agent
  4. File formation articles
  5. Draft an operating agreement

Registered business entities in Alabama must be unique and may not be too similar to another registered business or any government agency (NSA, FBI, etc). Additionally, the business name may not include “corporation” (Corp.) or “incorporated”(Inc.), but should include one of:

  • LLC
  • L.L.C.
  • Limited Liability Company

Name registration may also require additional articles and a licensed member to include specific terms like “bank”, “veterinarian”, and other specific professional services.

To conduct the name search, use the Alabama State Business Entity Search website.

Step 2: File a Name Reservation Request Form for Domestic Entities

Before officially forming your LLC, you’ll need to reserve your name by filing for a Name Reservation. You can choose:

  • Online Filing – $28 for Non-Alabama Interactive subscribers, $27 for subscribers.
  • Mail-In Filing – $10 (+$25 for optional expedited shipping and handling), sent to:P.O. Box 5616
    Montgomery, AL 36103

This process will usually take 2-3 days after the form is received (digitally or by mail).

Step 3: Choose Your Registered Agent

In Alabama, every LLC must appoint a registered agent for the company. This person, who can be a member, owner, third party, or even business is responsible for accepting legal documentation on behalf of the company.

They must:

  • have a physical street address (no P.O. boxes) in Alabama
  • be 18 years or older
  • be authorized to do business in Alabama (for business agents)

Commercial registered agents can be hired and appointed to an Alabama LLC, allowing out-of-state owners and members to still form in Alabama without permanent residence.

Step 4: File Your Formation Articles

The articles you are going to file will depend on whether you are filing from within Alabama (domestic) or from out-of-state (foreign).

Domestic formations require a Certificate of Formation to be filed either online or through the mail. Mail filings should include 3 copies of the Certificate of Formation and a copy of the approved Certificate of Name Registration. The correct probate office to file physical forms with depends on the address of the registered agent on the filings. Contact information can be found in the Office Directory.

Online Filing (Domestic):

  • $100 filing fee (plus probate fees for the county office and 4% online convenience fee)
  • Turnaround time: 1 – 3 days
  • Submit online

Mailed Filing (Domestic):

Foreign formations require an Application for Registration to be filed with the state itself. Forms can be completed online, or printed and mailed. Printed filings should include 3 copies of the Application for Registration, and a copy of the approved Certificate of Name Registration.

Online Filing (Foreign):

  • $150 filing fee (plus 4% online convenience fee)
  • Turnaround time: 1-3 days
  • Submit online

Mailed Filing (Foreign):

  • $150 filing fee (plus optional $100 expedited processing fee)
  • Turnaround time: 3-5 business days, or 24 hours if expedited
  • Complete the form and mail to:

P.O. Box 5616
Montgomery, AL 36103

Step 5: Draft an Alabama Operating Agreement

While not a legal requirement, creation of an operating agreement for single and multi-director LLCs is highly recommended. This legal documentation outlines important details about the composition of the LLC, including ownership percentage, voter rights, investments by each member, profit payout strategy, responsibilities, and more. It can settle disputes between multiple directors, or act as proof in court when signed and acknowledged by all parties involved. It is recommended that each director keeps a copy, and that a copy is held with the other business records until needed. However, it does not need to be filed with the state.